Market Matters Blog

Private exporters reported to the USDA that China cancelled purchases of 19.8 million bushels of soybeans for the 2012/13 marketing year. The news confirms commercial trade action in the past few days and reflects growing concern about demand for U.S. soybeans.

The news quickly discounted this morning's export sales and shipment report (the numbers are about a week) that showed a bean shipments were more than double what's needed to meet USDA's annual export project. Sales came in at 23.1 mb, far more than the 6.7 mb needed to stay on pace. Nearby soybean futures spent the day double digits in the red.

Yet the reason for China's cancellation isn't entirely clear, DTN Senior Analyst Darin Newsom said.

"It could be China was stockpiling on the uncertainty of South American crop, and now that the weather has turned more beneficial, China feels it can cancel. Another idea is that China is playing the market -- it bought low and is now selling high on the idea it can re-own supplies at a lower price again. I don't know that this is the case because they aren't really selling in the cash market, just cancelling purchases.

"It's a chicken and the egg thing. Lower prices aren't causing cancellations; cancellations are causing lower prices as commercials cover previous sales. It's a vicious trade at a time of low volume in the markets. Until we see signs of support, prices could continue to fall," Newsom said.

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